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India’s Economy Shows Signs of Slowing in December

NEW DELHI – India’s economic activity showed signs of slowing in December, belying hopes of a quick turnaround suggested by the previous months data, The Hindu Business line reported Wednesday.
A gauge measuring overall activity, or animal spirits, moved two notches lower in December from a month ago, underpinning a view that India’s growth has slowed and it might need a dose of fiscal and monetary stimulus to boost demand. The indicator, compiled by Bloomberg, reflects a pullback in new orders and business activity, as well as easing inflationary pressures.
While overall demand remained subdued, expectations of a financial package for farmers in the governments interim budget is stoking hopes for a revival in rural consumption. Here’s a breakdown of the dashboard:
Growth in both services and manufacturing slowed in December, with the Nikkei India Composite PMI Output Index falling to 53.6 from a 25-month high of 54.5 the previous month. While manufacturing firms saw a slower expansion in jobs creation, the dominant services sector saw companies hire extra staff, all of which supported business sentiment at a three-month high.
Still, input-cost pressures eased, suggesting selling prices for firms slowed. That’s likely to make it easier for the inflation-targeting Reserve Bank of India to cut interest rates in the coming months.
Exports in December barely grew from a year earlier, while performing only slightly better than in November as a global slowdown kept the lid on demand. A double-digit contraction in exports of gems and jewelery and a 3.1 percent drop in machinery and engineering goods weighed down non-oil shipments, according to Madhavi Arora, an economist at Edelweiss Securities Pvt.
The gap between exports and imports was at $13 billion in December, compared with $16.7 billion the previous month, as a drop in crude oil prices narrowed the import bill. A smaller trade deficit is likely to prove less of a drag on overall gross domestic product growth in the fourth quarter.
Data from the Society of Indian Automobile Manufacturers showed that firms clocked their lowest monthly sales so far in the financial year through March 2019, according to Sridhar V, a partner at Grant Thornton India LLP.
Little bit of easing of funding and favorable fuel price levels can improve sentiment in the fourth quarter, he said.
The Citi India Financial Conditions Index, a liquidity indicator, shows a sharp drop in December, hitting consumption. But signs emerged this month that the tight financial conditions are easing. The index includes gauges such as short-term money market rates, government bond yields and credit default spreads.
Demand for bank loans held steady — up 15.1 percent in December from a year earlier, and broadly unchanged from the equivalent rise seen in November.
Growth in infrastructure industries — which contribute 40 percent to factory output — slowed considerably in November to the lowest reading in 16 months. It was dragged down by a slump in production of crude oil and fertilizers.
(Sahar News Monitoring Desk)

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